FRANKFURT, June 14 The European Central Bank is
at risk of coming under political pressure to keep its
ultra-easy policy stance in place and help national budgets,
which have already saved billions of euros in interest costs,
Bundesbank President Jens Weidmann said on Wednesday.
With its 2.3 trillion euro ($2.6 trillion) asset purchase
programme already running for more than two years, the ECB has
become the single largest creditor to euro zone governments. Any
hint of policy tightening poses the risk of pushing yields
higher, blowing a hole in national budgets.
"At the end of the day, this can lead to political pressure
being exerted on the Eurosystem to maintain the very
accommodative monetary policy for longer than appropriate from a
price stability standpoint," Weidmann, who sits on the ECB's
rate setting Governing Council said.
"After all, in the context of these asset purchases, changes
in monetary policy impact more directly on governments' funding
costs than interest rate moves," he added.
Fighting stubbornly low inflation, the ECB has kept rates in
negative territory for years and deployed a wide range of
unconventional tools to stimulate growth and ultimately consumer
Weidmann was also critical of a proposal to create a
so-called European safe bond, a synthetic instrument that would
pool sovereign debt into a new bond, creating a new safe asset
that banks could hold to diversify their balance sheets.
"But a European Safe Bond created by an official European
entity could be perceived as a stepping stone towards full-blown
Eurobonds, i.e. mutual liability," Weidmann said, who has long
"To avoid that perception, European Safe Bonds would have to
be constructed by market participants," he added.
The European Systemic Risk Board, headed by ECB President
Mario Draghi, has been working on a proposal for such a safe
bond but has already come under fire from Germany, which sees
the tool as a Eurobond through the back door.
($1 = 0.8916 euros)
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)